Multiple Fed rate hikes will make banks more aggressive opening for lending this year: CFRA's Leon
Global investors are hanging on every word spoken by U.S. Federal Reserve officials (including Governor Christopher Waller, who told our Bloomberg Television partners he sees three moves this year as “a good baseline”), but our audience has made it clear nothing matters more to them than the prospect of the Bank of Canada fast-tracking liftoff. J.P. Morgan’s expectation that the Canadian central bank will raise its benchmark interest rate on Jan. 26 is our runaway top story online this week. So we’ll keep peeling back the layers on what a quarter-point hike this month would mean for the economy, particularly if it’s just the first step toward up to seven rate hikes this year, as markets are currently pricing in.
BRUSHING OFF A RATE HIKE
The chief executive of Royal LePage isn’t sweating the potential hit to housing activity whenever the Bank of Canada starts raising rates. In a report published today, Phil Soper notes the housing market is thriving right now despite mortgage stress test rules that already force buyers to prove they’d cover their obligations at significantly higher rates. And so Royal LePage said the Bank of Canada’s liftoff “may not be enough to offset the significant upward price pressure from Canada’s housing supply crisis.” We’ll elaborate on this with Soper at 4:30 p.m.
WHERE’S THE FLOOR FOR SHOPIFY?
After yesterday’s drop of almost nine per cent (which was single-handedly responsible for wiping 100 points off the TSX), the Canadian e-commerce service provider’s shares have plunged 37 per cent since mid-November as they’ve been swept up in the broader tech rout. Analysts are still generally favourable, with 27 of 46 tracked by Bloomberg telling clients to buy the shares. We’ll chase insight on the risks and opportunities for investors.
U.S. BANK EARNINGS SEASON
It’s going to be hard to shake the Fed as a talking point today, and that rings true for the major U.S. banks that are reporting this morning, all of whom can look forward to stronger net interest margins once rates start to rise. JPMorgan Chase & Co. set the bar this morning with mixed results. At the high level, fourth-quarter net income fell 14 per cent to US$10.4 billion as expenses rose and muted loan activity in its consumer banking division. Investment banking was a bright spot, with revenue from that unit surging 28 per cent. Revenue from markets activity fell, with JPMorgan noting "a challenging trading environment in rates."
OTHER NOTABLE STORIES
- Back to the Fed for a moment. Nothing official yet, but Bloomberg and other U.S. media outlets are reporting U.S. President Joe Biden has identified his nominees to fill vacant spots at the central bank, including economists Lisa Cook and Philip Jefferson, who are eyed for governor roles.
- Bausch Health has finally filed for the initial public offering of its eye-health unit. Bausch + Lomb Corp. will list on the NYSE and TSX under the symbol BLCO. The offering is being led by Morgan Stanley and Goldman Sachs. There isn’t a single Canadian institution among the underwriters. Bausch initially announced its plan for this listing in August 2020.
- Cogeco Communications beat the average revenue and profit estimates in its fiscal first quarter. Looks like the American broadband business was the growth driver, with that unit’s revenue surging 31 per cent year-over-year as the US$1.125-billion acquisition of Ohio Broadband Systems was integrated. We’re speaking with CEO Philippe Jetté at 3:20 p.m.
- Notable data: U.S. retail sales and University of Michigan consumer sentiment index, China trade balance
- Notable earnings: JPMorgan Chase & Co., Citigroup, Wells Fargo
- 915: Prime Minister Justin Trudeau leads announcement on child care
- 1100: Government of Canada officials provide COVID-19 update and present modelling data
- 1200: Bank of Canada and Office of the Superintendent of Financial Institutions releases final report of the Climate Scenario Analysis Pilot
- REMINDER: Teck said it will meet with United Steelworkers Local 7619 re. Highland Valley Copper notice today; strike action could begin Jan. 16
- REMINDER: Federal vaccine requirement for truckers takes effect tomorrow